There’s nothing quite like the joy of welcoming a new grandchild into the family. With their tiny hands wrapped around your finger and a lifetime of promise ahead, it’s natural to want to support their future success. While doting on them with adorable onesies and stuffed animals is wonderful, the gift of a strong financial footing can last well beyond childhood. Here are some proactive financial steps you can take to set them up for long-term security and opportunities.

1. Revisit Your Estate Plan

A new grandchild is a perfect time to review (or establish) your estate plan. Ensure that your will, trusts, and beneficiary designations reflect the newest member of your family. If you already have a trust in place for other grandchildren, consider adding this new grandchild as a beneficiary. If you don’t have a trust, this might be an ideal opportunity to create one. A trust can help protect assets from unnecessary taxes or probate delays, ensuring more of your legacy reaches your descendants.

Tip: Schedule a meeting with an estate planning attorney. Even subtle changes in tax laws or family dynamics may warrant updates to ensure your estate plan is current and optimized.

2. Open (or Contribute to) a 529 College Savings Plan

A 529 plan is a tax-advantaged account specifically designed for saving for education expenses. By starting early—right when your grandchild is born—you allow contributions to grow, compounding tax-free over nearly two decades. When they’re ready for college or a qualifying educational program, distributions are usually tax-free when used for educational expenses.

Tip: If your state offers a tax deduction or credit for contributions, take advantage of it. Even small, regular gifts add up, and many plans allow others, such as friends or other family members, to contribute as well.

3. Consider a Uniform Transfers to Minors Account (UTMA) or Uniform Gifts to Minors Account (UGMA)

If you’d like to set aside funds for your grandchild’s future without the education-specific constraints of a 529 plan, a UTMA or UGMA account may be right for you. These accounts allow assets to be held in a minor’s name and eventually transferred when the child reaches the age of majority. While these accounts offer fewer tax advantages, they’re more flexible. Funds can be used for any purpose that benefits the child, from extracurricular activities to their first car.

Tip: Keep in mind that once the child reaches the specified age (often 18 or 21, depending on state laws), the money is theirs to manage outright. If you’re concerned about how they might handle a windfall, you may prefer a trust or other vehicles that offer more oversight.

4. Reassess Your Own Financial Stability

Before making any financial commitments on your grandchild’s behalf, take a step back and ensure you’re on solid footing. Review your current retirement accounts, emergency funds, debts, and general cash flow. The goal is to confirm that your generosity won’t strain your own well-being now or in the future. A strong personal financial foundation ensures you can continue contributing meaningfully to your grandchild’s life without jeopardizing your own security.

Tip: Consider meeting with a financial advisor to get a thorough picture of your financial health. They can help you create or refine a plan that supports your goals—for your family and for yourself—over the long term.

5. Simplify and Organize Your Financial Affairs

Take time to organize your finances so your family will have a clear understanding of what you have in place. Consolidate multiple bank accounts, investment portfolios, and any scattered assets. Keep an updated record of your account numbers, passwords, and other essential documents in a secure place. The more streamlined and transparent your finances are, the easier it will be for your family to manage your legacy and respond efficiently should unexpected events occur.

Tip: Use a secure digital vault or a well-organized filing system, and inform a trusted family member where to find these documents. Periodically review and update this information so that it remains accurate and accessible over time.

6. Pass Down Financial Wisdom

Don’t underestimate the power of financial literacy. As your grandchild grows, share age-appropriate lessons about saving, investing, and the value of money. You might start with a small allowance and a piggy bank, advancing to more sophisticated concepts as they mature. By instilling good habits early, you’re offering a lifelong advantage that often surpasses the value of any single monetary gift.

Tip: Consider gifting them a child-friendly financial education book or board game. When they’re older, introduce them to basic budgeting tools and apps that make learning about money fun and interactive.

7. Coordinate with Family Members

You don’t have to go it alone. Talk to your children (the new parents) and other family members about pooling resources or adopting a unified savings approach. Perhaps everyone agrees to contribute to a 529 plan each birthday instead of lavish toys, or maybe family members rotate the responsibility of adding a set amount each year. A joint effort can amplify the impact of every contribution.

Tip: Establish a system of communication with your family about financial milestones—like annual statements or contribution updates—to ensure everyone is on the same page.

Final Thoughts

The birth of a grandchild marks a new chapter of love and learning. As you cuddle your new family member and imagine their bright future, remember that your financial choices today can help shape the opportunities they’ll have tomorrow. Whether it’s through a dedicated college savings plan, an updated estate strategy, or passing on the gift of financial know-how, the steps you take now are truly an investment in their future.

Disclosure:

Fortress Financial Group, LLC (“Fortress”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Fortress and its representatives are properly licensed or exempt from licensure.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.